Income Tax Appellate Tribunal - Jaipur
Sunil Galav , Baran vs Department Of Income Tax on 5 June, 2015
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IN THE INCOME TAX APPELLATE TRIBUNAL,
JAIPUR BENCHES, JAIPUR
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BEFORE: SHRI R.P. TOLANI, JM & SHRI T.R. MEENA, AM
vk;dj vihy la-@ITA No. 489/JP/2012
fu/kZkj.k o"kZ@Assessment Year : 2008-09
The ITO cuke Shri Sunil Galav
Baran Vs. Prop. M/s. Sunil Sales
Agencies
Hospital Road
Baran
LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: ABIPG 6484 H
vihykFkhZ@Appellant izR;FkhZ@Respondent
jktLo dh vksj ls@ Revenue by : Smt. Neena Jeph, JCIT
fu/kZkfjrh dh vksj ls@ Assessee by : Shri G.G. Mundra, CA
lquokbZ dh rkjh[k@ Date of Hearing : 06/05/2015
?kks"k.kk dh rkjh[k@ Date of Pronouncement : 5 /06/2015
vkns'k@ ORDER
PER R.P. TOLANI, JM
This is an appeal filed by the Revenue against the order of the ld. CIT(A), Kota dated 15-03-2012 for the assessment year 2008-09 raising following grounds.
''On the facts and in the circumstances of the case, the ld. CIT(A) has erred in:-
2 ITA No. 489/JP/2012
ITO , Baran vs. Shri Sunil Galav
(i) deleting of Rs. 8,00,599/- on account of excessive claim regarding payment of salary.
(ii) deleting of Rs. 62,141/- on account of excess interest paid to loan creditors covered by the provisions of Section 40A(2)(b)
(iii) restricting disallowance of Rs. 17,477/- instead of Rs. 34,954/- on account of shop expenses.
(iv) deleting of Rs. 2,70,200/- on account of business promotion expenses.
2.1 Brief facts of the case are that the assessee is proprietor of M/s. Sunil Sales Agency dealing in selling of new Holland Tractors and dealership of Hindustan Petroleum Corporation in the name of M/s. Arun Filing Station, Mangrole, Distt. Baran. The assessee is maintaining books of account which are audited u/s 44AB of the Act. Survey proceedings were taken up in the premises of the assessee u/s 133A of the Act on 18-10-2007. During the course thereof, the assessee surrendered an amount of Rs. 35,15,505/- in respect of money lending business and low house hold withdrawals which are offered in the return of income along with regular income. The survey team did not raise any issue about the surrender and survey statement, taxes thereon were also paid. During the course of assessment ld. AO however went into survey material and 3 ITA No. 489/JP/2012 ITO , Baran vs. Shri Sunil Galav beyond the offer made in the course of thereof, following additions were made to the income after calling explanation from assessee:
Returned income as declared Rs. 35,17,399/-
Additions, as discussed above in the assessment order
(i)Excessive claim regarding payment of salary 8,00,599/-
(ii)Excess interest paid to the loan creditors 62,141/-
covered by the provisions of Section 40A(2)(b)
(iii) Addition accrued interest on NSC 6,300/-
(iv) Disallowance of shop expenses 34,954/-
(v) Disallowance of vehicle expenses 20,714/-
(vi) Disallowance of Telephone & Mobile Expenses 7,160/-
(vii) Addition Rental Income 22,680/-
(viii) Disallowed sales tax penalty 3,040/-
(ix) Disallowance business promotion expenses 2,70,200 12,27,788
Total assessed income 47,45,187/-
Rounded Off to 47,45,190/-
2.2. Aggrieved, the assessee preferred first appeal where facts and circumstances of the case were reiterated; ld. CIT(A) after considering the contentions and material available on record deleted the disallowances of salary, excess interest paid u/s 40A(2)(b) and business promotion expenses and part relief was granted in respect of shop expenses. 4 ITA No. 489/JP/2012
ITO , Baran vs. Shri Sunil Galav 2.3 Aggrieved, the Revenue is before us; ld. DR relied on the order of the AO and contends that:-
(i) Deletion of disallowance in respect of salary is unjustified as two of the employees denied rendering of services to the assessee. Therefore, reliance of ITAT order in ITA No. 436/JP/2011 for the assessment year 2007-08 as placed by the ld. CIT(A) in this behalf is unjustified.
(ii) As regards the disallowance u/s 40A(2)(b), the assessee paid interest @ 18% whereas the interest paid to other parties @ 12%. Thus the relief given relying on ITAT judgment is unjustified.
(iii) For other relief, ld. DR placed reliance on the order of the AO 2.4 The ld. AR on the other hands contended as under for respective grounds:-
(i) salary expenses :-
The assessee before CIT (A) submitted a chart showing the names of employees and nature of job done by them. The salary to each employee was paid monthly and debited to their respective personal account and at year end the same after reconciliation transferred to salary A/c. Thus the salaries payments are genuine, for the purposes of business of assessee and commensurate with earlier year salary as observed by Ld. CIT (A) and rightly deleted the disallowance, following the ITAT order dated 21-10-2011 in ITA No. 436/JP/2011in its own case, for assessment year 2007-08 dealing exactly same facts and same issue. The issue on this 5 ITA No. 489/JP/2012 ITO , Baran vs. Shri Sunil Galav ground is covered in favour of assessee from said order of Hon'ble Bench in case of assessee for A.Y. 2007-08.''
(ii) Interest paid u/s 40A(2)(a) of the Act ''The order of CIT (A) is by following the decision of ITAT, Jaipur Bench, Jaipur in case of assessee for A.Y. 2007-08 on the exactly same issue. The issue is thus covered in favour of assessee and thus is in accordance with law and has no infirmity which deserves to be upheld.''
(iii) Shop Expenses ''The Ld. A.O. disallowed Rs. 34,954/- being 20% of Shop Expenses amounting to Rs. 1,74,773/- holding that being not related to business activity and also not fully vouched. The CIT (A) after looking into nature of expenses and facts of the case held disallowance of 10% as reasonable deleting Rs. 17,477/- out of claimed expenses.
The estimate of ld. CIT (A) is reasonable as no reasons are advanced by revenue as to how the 10% is unreasonable or arbitrary.
(iv) Business Promotion Expenses ''The assessee debits expenses for bucker, cultivator etc. purchased during the year which accessories were given free of cost to purchasers of Tractors. The Ld. CIT (A) deleted the addition following the order of ITAT, Jaipur Bench, Jaipur while deciding the assessee's CO for A.Y. 2007-08 on the same issue. Thus the order of CIT (A) is following the order of Hon'ble Bench is in conformity with ITAT judgment and in accordance with law deserves to be upheld.
The assessee maintains the proper books of account which have not been rejected. During the course of survey proceedings, the assessee made 6 ITA No. 489/JP/2012 ITO , Baran vs. Shri Sunil Galav statement disclosing the surrender of an amount of Rs. 35,15,505/- which have been duly offered and taxes thereon have been paid. The AO has relied on the statements of the junior employees who looked after only workshop and showroom and had no idea about the management of field staff. During the course of survey proceedings, the signatures of the assessee were obtained and it was not objected by the assessee under a bona fide belief that his surrender will be accepted and no further additions will be made. The ld. AR of the assessee in this connection submitted that a junior employee in business is not expected to know the total number of employees working at workshop, showroom and field staff and about their salaries and thus their pedantic statement in this respect has no credence. The mere signature of assessee on said statement may have been taken along with other papers at the time of survey but ultimately the issues were assured to be settled in view of the surrender. It is settled position of law that section 133A does not empower the authority to examine any person on oath by an inspector, hence, any such statement have no evidentiary value and any admission made during such statement by itself cannot be made basis for addition as held in CIT Vs. S. Khader Khan Son 214 CTR 589 (Mad.) confirmed by Supreme Court in (2013) 352 ITR 480 and Paul Mathews & Sons Vs. CIT 181 CTR 207 7 ITA No. 489/JP/2012 ITO , Baran vs. Shri Sunil Galav (Ker). In view of this legal position the Ld. A.O. was unjustified in making disallowance of salary on the basis of statement(s) of two employee only. The ld. AR of the assessee further submitted that The Ld. CIT (A) after considering submission of assessee in para 8.3 of appeal order held that "Before making disallowance u/s 40A(2)(a), A.O. is required to give a finding that payment is excessive or unreasonable in view of fair market value of goods or services. In this case no material has been brought on record by A.O. to prove that during the year interest rate was 12% per annum only. In such a situation AO is not justified to make a disallowance u/s 40A(2)(a) in this case. This view also derives support from following decisions.
a) Anil Kumar Vs. IAC (1986) 15 ITD 695 (ASR) b) Omkarmal Gaurishankar Vs. ITO (1991) TTJ (Ahd.) 223 c) ITO Vs. Chamba Mal Roop Chand (2001) 70 TTJ (Asr) 43 d) R.R. & P.M. Murugain Chettiar Vs. ITO (1976) 2 TTJ (Mad.) 1229 e) Poimera Seshaiahsetty & Sons Vs. ITO (1981) 12 TTJ (Hyd) 248 f) ITO Vs. K.S. Bhashin (1983) 17 TTJ (Gau.) 134." 2.5 We have heard the rival contentions and perused material available
on record. In our considered view there is no infirmity in the order of the ld. CIT(A) which has been passed after due verification of the facts and records. As the facts emerge, the assessee has abided by the surrender 8 ITA No. 489/JP/2012 ITO , Baran vs. Shri Sunil Galav made during the course of survey and has paid due taxes thereon. The disallowances out of salary in respect of both the business have been made relying on the adverse statements of two employees who were not the in charge of the personnel department and had no control over the administrative staff. Besides in survey statements during the course of survey, there is no provision for statement of oath of the employees which has been held by the various Courts in the case of CIT vs. S Khader Khan Son and confirmed by Hon'ble Supreme Court (supra) and Paul Mathews & Sons (supra). The disallowance as to salary has been deleted by the ld. CIT(A) considering the ITAT order (supra). Thus in view thereof, we are inclined to uphold the order of the ld. CIT(A) on this issue. 2.6 Similarly in respect of Section 40A(2)(b) and business promotion expenses, the ld. CIT(A) has followed the ITAT judgment (supra) of preceding year for which we find no reason to interfere in the order of the ld. CIT(A) on these issues and the order of the ld. CIT(A) is upheld. 2.7 Apropos shop expenses, the estimate of disallowance has been reduced from 20% to 10% which does not appear unreasonable or arbitrary. Therefore, we find no infirmity in the order of the ld. CIT(A) which is upheld.
9 ITA No. 489/JP/2012
ITO , Baran vs. Shri Sunil Galav 3.0 In the result, the appeal of the Revenue is dismissed.
Order pronounced in the open court on 5/06/2015.
Sd/- Sd/- ¼Vh-vkj-ehuk½ ¼vkj-ih-rksykuh½ (T.R. Meena) (R.P.Tolani) ys[kk lnL;@ Accountant Member U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 5/06/ 2015 *Mishra
vkns'k dh izfrfyfi vxzfs 'kr@Copy of the order forwarded to:
1. vihykFkhZ@The Appellant- The ITO, Baran
2. izR;FkhZ@ The Respondent- Shri Sunil Galav, Baran
3. vk;dj vk;qDr¼vihy ) @ CIT(A)
4. vk;dj vk;qDr@ CIT
5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur
6. xkMZ QkbZy@ Guard File (ITA No.489/JP/2012) vkns'kkuqlkj@ By order, lgk;d iathdkj@ Assistant. Registrar